The Third Report of Session of the House of Commons European Scrutiny Committee seeks clarification on the Government’s intentions for negotiations of equivalence arrangements with the EU from the end of the transitional period.
The report is wide-ranging but, in relation to financial services, states the Committee has asked John Glen, Economic Secretary to the Treasury, to seek further information on the intentions behind any agreement. It notes the EU’s general publications around third-country equivalence, and queries why the UK Government appears to be seeking some more limited preferential treatment based on the EU assessing equivalence by June 2020. It says it is unclear what happens if equivalence is not obtained. It also queries the benefits of equivalence if it is not available for some key areas of the financial services marketplace and also notes that equivalence very rarely leads to full cross-border market access in any event. It notes the UK has no right to equivalence and that the EU has not committed to granting it – and that, where it does grant it, it is likely to insist on some form of continued substantive regulatory alignment.
The UK is understood to be asking for some structure in any withdrawal of equivalence and does not want to have to commit to regulatory alignment. The Committee wants more clarification on how the UK would propose to approach the trade off between regulatory freedom and EU market access, and does not understand why the UK is wedded to the EU finishing its assessments by June – since even this would not guarantee market access by the end of the transition period.
The letter to John Glen makes these, and other, points, and asks whether the Financial Services Bill will give Treasury powers to update UK law in line with EU amendments, which would allow continued alignment without the need for more primary legislation. It asks:
- what the proposed “institutional arrangement” in relation to financial services is;
- which equivalence assessments are priority;
- for confirmation that the Government seeks only positive equivalence assessments for financial services by June, rather than actual legal decisions, but also asks why this deadline is so critical;
- for more detail on the “structural” restrictions on withdrawal of equivalence that the Government wants and whether there are some equivalence decisions that the Government will not pursue as the risks to market and financial stability are too great;
- for specific information on how the Government intends to pursue cooperation in relation to EMIR, and the “comparable compliance” mechanism ; and
- for clarity on the relevant provisions in the Financial Services Bill.